Blackstone works on securities based on houses

Wednesday

Jul 31, 2013 at 11:35 AM

Staff and Wire Reports

Blackstone Group LP, the private-equity firm that has spent $5 billion buying more than 30,000 houses to rent them out, is working with Deutsche Bank AG as it considers creating securities tied to about 1,500 of such properties, according to a person with knowledge of the matter.

It would be a first-of-its kind effort, but one that already has some analysts wary, given the securitization fiascoes that helped contribute to the length and depth of the Great Recession, when packaged home loans were sold as safe investments but turned out to be anything but.

Analysts cite the lack of a long-term track record for how regularly tenants living in previously foreclosed homes pay their rent on time.

But even after some of the disastrous securitization efforts leading up to the downturn, investors remain hungry for the possible returns from the proposal.

Blackstone and other institutional home buyers have been having a huge impact on the real estate market in Manatee and Sarasota counties since arriving last fall.

Of the area's 1,718 single-family home and condo sales in June, for example, fully 10 percent were acquired by players like Blackstone and Colony Capital of California, according to recently compiled data from RealtyTrac Inc.

The bonds being proposed by Blackstone, which Deutsche Bank might begin marketing to investors as soon as next month, could have about $250 million in balances and be backed by $300 million to $350 million in collateral, said the person, who asked not to be named because the discussions are private.

Christine Anderson, a spokeswoman for Blackstone, declined to comment, as did Renee Calabro, a spokeswoman in New York for Deutsche Bank.

Blackstone has led private-equity firms including Colony and Apollo Global Management LLC that have emerged as large-scale landlords as the housing market recovers from a five-year slump.

New York-based Blackstone has a $3.6 billion credit line from lenders led by Deutsche Bank.

Blackstone's efforts in Southwest Florida also have prompted larger concerns from some who actively track the region's real estate market.

The proliferation of cash buyers has boosted Southwest Florida's sales well above last year's activity. The cash buyers have created bidding wars and their offers sometimes far exceed assessed values and asking prices.

Some worry that the trend could spur long-term setbacks for the economy -- limiting traditional purchases from move-up buyers, shutting first-timers out of the market and inflating home values beyond what most middle-class families can manage.